Industrial, Power Prices, Utilities  -  August 31, 2016

Utility's $4.5B request shocks Ohio manufacturers

Ohio-based utility holding company FirstEnergy Corp. has asked state regulators to approve as much as $568 million a year for eight years in customer surcharges, Bloomberg News reported Aug. 30. 

The request follows two years of controversy in the state over a series of proposals from FirstEnergy and its utility subsidiaries that many Ohio stakeholders have said amount to a customer-funded bailout for the companies. Similar to a number of other U.S. utilities and power generators, FirstEnergy's business has been struggling in recent years amid lackluster electric demand growth and low power prices.

Bloomberg reported that manufacturers, consumer advocates and environmental groups are all "flabbergasted" by the proposed hike, which FirstEnergy argues is needed to cover "the economic impact of having its headquarters in Akron," Ohio. 

"When they first told me that was in there, I thought it was a joke," Eric Burkland, the president of the Ohio Manufacturers’ Association, which opposes the fee increase, told Bloomberg News. "From a manufacturing ratepayer’s perspective, it’s just bizarre."

 Bloomberg reported: 

While governments often offer tax breaks to lure businesses, Burkland said he was unaware of another utility asking ratepayers for payments tied to the company’s headquarters. The company had initially asked the commission to approve a power-purchase agreement for its Sammis coal plant and Davis-Besse nuclear plant, which were struggling in the competitive regional power market.

Within the corresponding regulatory proceeding with the Public Utilities Commission of Ohio (Docket No.  14-1297-EL-SSO), other groups, including the Ohio Consumers Office, the Environmental Defense Fund, along with other energy companies, have also expressed disapproval of FirstEnergy's efforts. 

"The goals of these alternatives, simply put, are to put money in the hands of the shareholders and to make up for years of bad financial bets on fossil fuels and against clean and efficient energy," the Environmental Defense Fund said in its brief to the state commission. 

An attorney for Direct Energy Services LLC and Direct Energy Business LLC shared similar opposition to an alternative proposal in the proceeding: 

"What is moot, however, is any pretense that this case involves anything but the dictionary definition of a bailout of the distribution companies, and a bailout of the credit-strapped unregulated utility holding company, First Energy Corp.," reads the companies filing with the commission.  "Staff’s alternative to Modified Rider RRS, proposes to 'fix' the credit and other financial problems of First Energy Corp. by requiring customers to absorb hundreds of millions of dollars of cash influx to the utility holding Company. It is not the Commission’s job to bailout utilities that make bad business decisions. Rather than burden its customers, FirstEnergy executives and shareholders, like any company facing hardships, should find solutions on their own." 

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